Investments – the financial year in review

It was a year of unpredictable outcomes – Britons voting in favour of Brexit and Donald Trump becoming the US president. Despite these events, Australian and International share markets performed well, although showing a little weakness in the last quarter of the year. In contrast Bond markets performed poorly with the Australian Bond market returning a mere 0.25% over the year.

 

The Reserve Bank of Australia (RBA) kept the cash rate at 1.50%. The RBA maintained its view that the temporary drags from the first quarter are reversing and that the labour market is improving. The unemployment rate fell to 5.5% the lowest since Feb 2013 and business conditions remained elevated suggesting that business is good and companies are confident to maintain investment for future profit growth. The RBA does have growing concerns over the outlook for consumers and elevated levels of debt and believes the currency should be lower. Despite low unemployment, wages growth is low and together with the high consumer debt levels, this will weigh on consumer spending. Large infrastructure projects should lend support to growth whilst residential housing will continue to slow.

In the US despite the long expansion period of eight years, inflation remains low and there appears to be little on the horizon to suggest that this will change. Unemployment has fallen to 4.3% and so it remains to be seen whether inflation in the US will begin to rise as workers begin to ask for higher wages.

In China, the government will begin to gradually curb credit growth later this year and follow up with interest rate rises soon.

The big question, what is the outlook for the coming financial year? China looks set to slow marginally as we head towards the end of the year whilst the US remains relatively strong and its unemployment is low, Trump has promised to increase economic growth but that still remains to be seen. We can expect the US Federal Reserve to raise interest rates once more in 2017. European growth looks to have lifted slightly and is expected to continue at a largely steady pace. As highlighted above in Australia poor wages growth and high consumer debt will limit consumption and this will keep a lid on economic growth. The large amounts of government spending on infrastructure should ensure positive growth continues in the economy.

If you are unsure how your investments are positioned for the coming period, please get in touch for an investment review or speak to us about our CARE investment philosophy.

This information has been prepared in conjunction with Emmanuel Calligeris Chairman of the GPS Wealth CARE Investment Committee. Emmanuel holds a degree in economics and previously had 20 years’ experience as Chief Investment Officer for OnePath Investments and was responsible for $13bn of funds under management.

This information contained in this document has been provided as general advice only. The contents of this document have been prepared without taking account of your personal objectives, financial situation or needs. You should, before making any decision regarding any information, strategies or products mentioned in this document, consult with your GPS Wealth Ltd financial adviser to consider whether it is appropriate having regard to your own objectives, financial situation and needs.